June 9, 2020

Producer Perspectives on Farmgate Prices & Technology

Increased coffee supply chain transparency could help farmers secure better coffee prices. However, few transparency efforts extend back to this group, which means that once a coffee leaves their farm, they rarely get to find out what roasters and even consumers pay for it. Increasingly, roasters want to know what producers are paid for their efforts – but producers aren’t able to share this information with them – or any of their thoughts on prices or profitability. 

It means that producers can’t access details on how their coffee is bought and sold outside the farm and how much is paid for it. It keeps them from being visible and vocal, so they can’t access the full value of transparency efforts or develop a dialogue with supply chain members.

Technology could help resolve this issue, with mobile transparency platforms like iFinca helping producers contribute to and receive more information from the supply chain, so they can make better decisions for themselves and their farms. We spoke to producers using the iFinca  platform in the Colombian producing region of Antioquia about pricing, transparency, and technology. 

Lee este artículo en español Tecnología y Precio en la Finca: Perspectiva de Los Caficultores

Adolfo Taborda (Lorena’s father) at Finca La Maria in Antioquia, municipio de Titiribí.

Adolfo Taborda (Lorena’s father) at Finca La Maria in Antioquia, municipio de Titiribí. Photo: Paisa Coffee

The Real Cost of Coffee Production

It’s common knowledge that the price producers receive for their coffee hasn’t kept pace with the cost of its production. Coffee’s C price or commodity price has been steadily declining for decades, resulting in some farmers earning just a few cents from the price of a US $3 cup of coffee. As a result, many producers struggle to break even, let alone make a profit. 

José David Posada Quecán is a second-generation coffee grower and says that for many producers, growing coffee means living in poverty. In addition, production requires a significant investment of time and money. Paul Doyle is the owner of Mikava Coffee, a Cup of Excellence-winning farm. He explains that “the investment required to produce coffee is huge… There’s a long wait on return if any. It takes two to three years for the first crop.”

Low prices not only keep producers from taking home profits but also ensure that any profits they do receive are forced to go towards meeting their family’s needs, instead of improving their farms or crops. “Oftentimes producers tell me that they have to decide where they will invest the little money they are paid for their coffee. Should they buy food for their family or invest the money in their coffee farms?” explains Lorena Taborda, the daughter of Colombian coffee producer Adolfo Taborda and Farmer Relations Manager at iFinca, an end to end platform application aimed at sharing transparent information sharing across the coffee supply chain.

She adds that it’s not uncommon to see producers who have spent their entire lives in coffee production unable to advance or expand their efforts because of this. José adds that this could impact the future of coffee production. While farms are typically passed down through generations, children growing up on coffee farms might abandon it in favour of better paying, white-collar jobs in the city. It’s unsurprising then that the average age of a Colombian coffee producer is over 57. 

Unless circumstances change for Colombian producers (and producers around the world), many coffee farms could end up abandoned or with drastically reduced outputs. A solution tailored to addressing their problems is needed.

You may also like What’s a Fair Price For Coffee? Interpreting Transparency Data

mparo Cardona of Finca La Loma, Antioquia Municipio de San Roque.

Amparo Cardona of Finca La Loma, Antioquia Municipio de San Roque. Photo: iFinca

Not All Transparency Efforts Are Equal

While transparency has become a buzzword in the coffee industry, the term can be abused by unscrupulous buyers who want to enjoy the marketing benefits of advertising their coffee as transparently sourced – but without the producers sufficiently benefiting from the transaction.

José has experienced this firsthand, when a buyer purchased his unique 30-year-old yellow Colombian variety coffee and promoted it across various social media platforms. For this, José received a fraction of what the coffee was sold for, at a price better suited to a much lower scoring coffee.

A common thread with transparency efforts that don’t benefit farmers is that they advertise a coffee’s Freight-on-board (FOB) prices and not what farmers are paid. This means that the buyer of José’s coffee likely used FOB prices to mislead consumers and roasters as to what José was paid. José thinks that informing consumers about what producers like him earn could prevent this from occurring in future. He tells me, “They actually can see what we get paid… It’s really good for us to let the final consumer know what we are doing.” If buyers can see what producers are actually getting paid, they can make ethical decisions about transactions.

This is something iFinca offers, as it allows coffee drinkers to scan a QR code to discover more about their coffee’s origin and story. Consumers and roasters can, therefore, seek out iFinca verified coffees to ensure they’re drinking coffee that has been sustainably sourced from producers – which will help open their coffees up to bigger markets. José says that the platform enables him to spend less time seeking out potential buyers and sending them samples – as many now find him through the platform.

Diego Maya of Finca Los Frailes. Antioquia municipio de Fredonia

Diego Maya of Finca Los Frailes. Antioquia municipio de Fredonia. Photo: iFinca

Technology Can Facilitate Transparency

A more transparent coffee supply chain can benefit producers in many ways – and help other supply chain members to ethically purchase coffee. Addressing this issue will mean democratising the process and giving every supply chain member access to the same verifiable information. For the producer, this can mean seeing their coffee’s true value as it passes to the consumer. For the consumer, it can mean knowing the coffee they enjoy at a coffee shop comes from a certain producer at a certain farm, at origin.

Francisco Uribe is a producer at Finca La Susana. He believes that transparency can help consumers see the effort that goes into producing a coffee, and help them improve their coffee and its marketing through feedback. “Consumers can see our farms, processes, and the difficulty and cost of producing one pound of quality coffee, and in turn can tell us what they like or would like from our coffee.”

Sebastian Celis of Finca La Hacienda Naranja. Antioquia en el municipio de Venecia

Sebastian Celis of Finca La Hacienda Naranja. Antioquia en el municipio de Venecia. Photo: iFinca

How Increased Transparency Benefits Producers 

Better prices for coffee means that producers can improve their lives and their farms. José says that higher prices have helped many farmers in the area to meet their basic household needs, send their kids to school, and hire extra workers for their farms.

However, Lorena believes that it also opens producers up to a world of creativity and that each producer will use their funds differently. She gives one example of a producer who decided to grind his own coffee using a bicycle instead of investing in a coffee grinder. This detail is something that a consumer would notice and respond to, making the coffee different from the rest. 

On the other hand, some farmers will focus on entering competitions by improving the quality of their coffees. Francisco says, “We are trying to place our coffees in competitions and for them to be the best tasting cups in the world”.

By establishing a brand and using technology to communicate with customers directly, producers could expand their future offers to include other products. For example, Francisco plans on selling honey produced by the meliponas (stingless) bees on his farm. “The world doesn’t know about stingless or native bees, and that their honey is incredibly delicious.”

John Jairo Rojas of Finca El Camilo, Antioquia municipio de Amagá.

John Jairo Rojas of Finca El Camilo, Antioquia municipio de Amagá. Photo: Paisa Coffee

Producers on every continent face several barriers that keep them from being paid higher farmgate prices. Improving transparency throughout the supply chain is the first step towards changing this. 

Some producers – such as those using iFinca – are already reaping the benefits of increased transparency. Accessing accurate information on their coffee pricing means they can value it accurately – and also communicate its value to roasters and coffee through marketing. 

It’s something that buyers, roasters, and consumers should motivate for, as when producers benefit, the entire supply chain benefits – and the coffee industry can keep going into the future.

Found this interesting? Then read Blockchain & Coffee: Separating The Marketing From The Reality

All quotes translated from Spanish by the author. Feature photo credit: iFinca

Please note: This article has been sponsored by iFinca.

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